Friday, September 3, 2010

Robert Reich today published in the New York Times what I feel is by far the best thing yet penned about our present economic situation.He calls it "How to End the Great Recession," and in it details how far the American worker has fallen from the heady days of the 1950s, '60s, '70s, and '80s.

I am going to quote two of his paragraphs here, the first and fourth in the article.

“This promises to be the worst Labor Day in the memory of most Americans. Organized labor is down to about 7 percent of the private work force. Members of non-organized labor — most of the rest of us — are unemployed, underemployed or underwater. The Labor Department reported on Friday that just 67,000 new private-sector jobs were created in August, while at least 125,000 are needed to keep up with the growth of the potential work force.”

That's the first paragraph. Here's the fourth:

“This crisis began decades ago when a new wave of technology — things like satellite communications, container ships, computers and eventually the Internet — made it cheaper for American employers to use low-wage labor abroad or labor-replacing software here at home than to continue paying the typical worker a middle-class wage. Even though the American economy kept growing, hourly wages flattened. The median male worker earns less today, adjusted for inflation, than he did 30 years ago.”

Reich goes on to detail his theory for why all of this has happened. It's a fairly simple explanation, given the complexities of trying to solve the problem, but it is perhaps best explicated in the 9th, 10th, and 11th paragraphs of his piece, as follow:

“Where have all the economic gains gone? Mostly to the top. The economists Emmanuel Saez and Thomas Piketty examined tax returns from 1913 to 2008. They discovered an interesting pattern. In the late 1970s, the richest 1 percent of American families took in about 9 percent of the nation’s total income; by 2007, the top 1 percent took in 23.5 percent of total income.

"It’s no coincidence that the last time income was this concentrated was in 1928. I do not mean to suggest that such astonishing consolidations of income at the top directly cause sharp economic declines. The connection is more subtle.

“The rich spend a much smaller proportion of their incomes than the rest of us. So when they get a disproportionate share of total income, the economy is robbed of the demand it needs to keep growing and creating jobs.”

Reich, of course, also casts blame on the credit and mortgage companies, which enabled middle-class earners (no longer earning enough to live at the level to which they had become accustomed) to take equity out of their homes, or out of thin air, the weight of which non-existent equity eventually toppled AIG, Countrywide, etc., and plunged us into our present doldrums.(As I write this, hurricane Earl lurks somewhere nearby, just offshore of Cape Cod, his intensity somewhat lessened, yet still considerable.)

Reich, quite correctly, correlates our present danger to one that lurked in 1928. Of course, then we understood less, and could do less in advance to stave off the crash. That said, it is my belief that the solutions that will get us out of our present jam will of necessity echo those arrived at by Eleanor and Franklin Roosevelt and their colleagues in the early '30s, whose purposes (several) were to put men and women back to work, to get money moving through the economy again, and to jumpstart the economy by encouraging new industry, public works projects, and a re-distribution of wealth, not in a totalitarian or heavy-handed way, but in a way which (by necessity) put money back in the hands of the consumer, money to be spent, money to be made.

Reich also harks back to the post-WWII-years, in which the G.I. Bill played such a large role in the lives of young Americans returning from war. And he has several interesting proposals.

One is to increase the income tax-rate on the very wealthy, and to eliminate the income tax on the first $20,000.00 earned by any individual.He also proposes that public universities and colleges be free, with those graduating paying 10% of whatever they earn/annum for the first ten years after graduating.

Clearly these ideas need fine-tuning, but they are on the right track. A vast priming of the American labor pump must be had, and soon, if we are to haul ourselves out of this slump, and it's going to require that we revisit the ideas of the 1930s, when Americans pulled together, when the CCC and the WPA (among others) provided jobs and wages for some of those who were out of work, and when it was recognized that good work was a basic need for all.

As Reich writes in the 15th, 16th, and 17th paragraphs of his piece,

“In the 1930s, the American economy was completely restructured. New Deal measures — Social Security, a 40-hour work week with time-and-a-half overtime, unemployment insurance, the right to form unions and bargain collectively, the minimum wage — leveled the playing field.

“In the decades after World War II, legislation like the G.I. Bill, a vast expansion of public higher education and civil rights and voting rights laws further reduced economic inequality. Much of this was paid for with a 70 percent to 90 percent marginal income tax on the highest incomes. And as America’s middle class shared more of the economy’s gains, it was able to buy more of the goods and services the economy could provide. The result: rapid growth and more jobs.”

We need similar, in my estimation, and soon. But we also need a change of attitude - how can any of this happen if we are not as a nation willing to accept that motto of the Musketeers: All for one, and one for all.

As I drove home today, back from the harbor where I had reinforced the mooring lines of my small boat, in anticipation of the high winds to come tonight, I was astonished to find a gathering of fifteen or so large trucks, all clearly equipped to work on electrical and phone lines, pulled over on the wide shoulder of a secondary highway. They were a crew, it turned out, of thirty or more men from Michigan, called in by FEMA or MEMA (our emergency agency here in Massachusetts) to help with the possible mayhem resulting from a direct hit by Hurricane Earl (I address him by his full name, as all storms must be accorded respect, lest they strike vindictively).

Of course, these guys are being paid and taken care of, and may have had little choice in coming here, yet I was moved by their presence, in my hometown, and I told them so. We need all the help we can get at the moment, until Hurricane Earl moves off. And then we all will still need all the help we can get. Them and us. They and we.

And I hope I have a chance, soon, to go and help someone in a similar way. Of course, the chances are all around us. We have but to remember that old saw about our neighbor, take it to heart, and the recession will recede, sure enough. I just hope that this is a nation that remembers how to do that. It's been a long time since the period 1932 to1945, a long time since 1932, which I would argue was the last time that we as a nation felt what it was like to pull together, and, gradually, win together.